Defendant
issued a Blanket Fidelity Bond for Securities Dealers, Bond
Number No. 015900031 (“the Bond”), to Wilbanks
Securities, Inc., with a coverage period from November 1,
2013 to November 1, 2014. Plaintiffs filed this action
seeking a declaratory judgment that certain claims being
pursued against Wilbanks Securities in a pending Financial
Industry Regulatory Authority (“FINRA”)
proceeding are covered by the Bond and that Defendant
National Union Fire Insurance Company of Pittsburgh
(“National Union”) will be required to indemnify
Wilbanks Securities for any award and defense costs.
Plaintiff also seeks damages for breach of contract and
breach of the duty of good faith and fair dealing. Defendant
seeks summary judgment, asserting that by its terms, the Bond
does not provide coverage for the claims asserted in the
FINRA proceedings. (Doc. No. 54). Plaintiff responded to the
motion and Defendant filed a Reply in support of its
position. Accordingly, the motion is ripe for disposition.
Having considered the parties' submissions, the Court
finds as follows.[1]

Wilbanks
Securities asserts that in May 2014, it provided notice to
National Union of a potential claim by Kent and Shawna Powell
regarding a February 2012 investment made by the Powells,
which Wilbanks Securities sold them. In December 2014,
Plaintiff provided National Union with a copy of the
Powells' Statement of Claim to FINRA, and asserted that
the claim, at least in part, was subject to coverage under
the Bond. In the Statement of Claim, the Powells alleged
claims stemming from investment in the Aztec Drilling
Program, as described below.

Mr. and
Mrs. Powell had a prior relationship with Wilbanks Securities
and one of its registered representatives, John Stevens, when
in 2012 Mr. Powell sold his business for 1.5 million dollars.
Powell sought Mr. Stevens's advice on how to best invest
the proceeds of the sale. Mr. Stevens first recommended a
Charitable Remainder Unitrust, but withdrew this
recommendation because the Powells would be unable to access
the funds once transferred to the trust. He then recommended
the Aztec Drilling Program, representing to the couple that
he and Wilbanks Securities had researched the company and its
drilling programs and investment therein would carry zero
risk and provide an 88% tax deduction in 2012, as well as
providing substantial monthly income after a year. Mr.
Stevens did not offer alternative investment suggestions, nor
did he advise the Powells that he lacked the requisite
license to sell the investment, although it was one of the
“approved products” of Wilbanks Securities. In
January 2013, acting in reliance on Stevens's
representations, the Powells met with Mr. Stevens to execute
the necessary subscription documents for the Aztec Drilling
Program. They concede their signatures appear on pages 9 and
12 of the Subscription Documents Booklet, but contend
initials in devoted spaces throughout the booklet are not
theirs, nor did they make any “check marks” in
the document. Mr. Stevens indicated they should sign their
names and he would complete the forms. The Powells, concerned
about the security of their sizeable investment, did not wire
the necessary funds until emailing with Mr. Stevens, who
assured the Powells they would not lose their investment, and
that he had an E&O policy for their protection in the
event their investment was lost. Believing Mr. Stevens's
additional representations, the Powells funded their 1.5
million dollar investment. However, despite Mr. Stevens's
promises, the Powells received only $37, 000 in
distributions, none of the promised tax benefits; the
remainder of their investment was lost.

In
connection with their allegations, the Powells contend their
signatures and initials were forged on a General/Limited
Partnership Disclosure Form that bears the Wilbanks
Securities, Inc. heading, which required the would-be
investor to acknowledge:

As an illiquid investment, I understand that my principal may
be tied up for more than 10 years. I hereby attest that the
investment does not represent more than 10% of my total
liquid assets and that my total illiquid direct participation
program and limited partnership investments, including this
purchase, do not exceed 20% of my total liquid assets.
(Exceptions may be available for accredited investors.)

Additionally,
Will Freeman, who the Powells alleged to be a broker and
general securities principal with Wilbanks Securities,
requested an exception to the 10% rule on their behalf,
although they were unaware of the form or the need for an
exception. Will Freeman never spoke with the Powells about
the program or its suitability, but received a commission
because the records indicated that he sold the investment.
The Powells allege this was so because the Aztec Drilling
Program was not available to Mr. Stevens under the Series 6
license he held, but was available to Mr. Freeman. The
Powells additionally contend that after their investment was
funded, Mr. Stevens requested that if anyone made inquiry,
they should indicate Will Freeman was their broker and had
made the recommendation. Their claims in arbitration are
grounded on the alleged material misstatements of Mr. Stevens
and the unsuitability of the investment, as well as the
alleged forgeries. The FINRA arbitration remains ongoing.

As
noted, Plaintiff filed the action seeking declaratory relief
with regard to indemnity under the Bond, which includes the
following provision:

Under the terms of the Fidelity Bond, “[t]he
Underwriter will indemnify the Insured against court costs
and reasonable attorneys' fees incurred and paid by the
Insured in defending any suit or legal proceeding brought
against the Insured to enforce the Insured's liability or
alleged liability on account of any loss, claim or damage
which, if established against the Insured, would constitute a
valid and collectible loss sustained by the Insured under the
terms of this bond.”

Doc. No. 1-2. Defendant National Union seeks summary judgment
on the basis that even if the Powells establish their claims
in arbitration, the claims fall outside the terms of the
Bond, and therefore, Wilbanks Securities is without recourse
thereunder.

Plaintiff's
claims are premised in part on the Federal Declaratory
Judgment Act which provides that “[i]n a case of actual
controversy within its jurisdiction, ...any court of the
United States, upon the filing of an appropriate pleading,
may declare the rights and other legal relations of any
interested party seeking such declaration, whether or not
further relief is or could be sought.” 28 U.S.C. §
2201(a) . “The phrase ‘case of actual
controversy' in the Act refers to the type of
‘Cases' or “Controversies' that are
justiciable under Article III of the United States
Constitution.” Columbian Fin. Corp. v. BancInsure,
Inc., 650 F.3d 1372, 1376 (10th Cir. 2011) (citations
omitted). The Tenth Circuit has cautioned that “Article
III has long been interpreted as forbidding federal courts
from rendering advisory opinions.” Id.
“It is not the role of federal courts to resolve
abstract issues of law. Rather, they are to review disputes
arising out of specific facts when the resolution of the
dispute will have practical consequences to the conduct of
the parties.” Id. The central question in
deciding whether a declaratory judgment action satisfies the
case or controversy requirement is “whether the facts
alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.” MedImmune,
Inc. v. Genetech, Inc., 549 U.S. 118, 127 (2007).

The
Court finds that there exists an “injury in fact”
herein despite the absence of an award in favor of the
Powells, based on the following: (1) the pending FINRA
arbitration proceedings; (2) Wilbanks Securities clearly
plans to seek indemnity for any award that results from the
FINRA proceedings; (3) the Powells claims may fall outside
the scope of the fidelity bond. Courts routinely hold, under
similar contingent circumstances, that Article III and the
Declaratory Judgment Act's “injury in fact”
requirements are satisfied. See Kunkel v. Cont'l Cas.
Co., 866 F.2d 1269, 1274 (10th Cir. 1989) (explaining
that the existence of contingencies, such as whether victim
has obtained a final judgment, does not prohibit the Court
from issuing a declaratory judgment); Cont'l Cas. Co.
v. Bowen, No. 2:09-CV-00810-TC, 2010 WL 3743909, at *1
(D. Utah Sept. 22, 2010) (“Federal courts can issue
declaratory judgment on the scope of insurance coverage, even
if the federal declaratory judgment action concerns some of
the same factual questions as the state court action about
which coverage is disputed.”); Farmers All. Mut.
Ins. Co. v. Willingham, No. 08-CV-0532-CVE-FHM, 2009 WL
3720023, at *2 (N.D. Okla. Oct. 28, 2009) (justiciable
controversy existed where insurer sought declaration of
coverage of a “specific claim” in the underlying
civil case because judgment would end the controversy between
the insurer and its insured); 22A Am. Jur. Declaratory
Judgments § 133 (generally, “an insurer's
action for a declaration that a liability policy does not
cover the claims against its insured is a case of actual
controversy sufficient to entertain the action for a
declaratory judgment”). Therefore, the Court concludes
it has subject matter jurisdiction over the dispute.

Summary
judgment is warranted under Federal Rule of Civil Procedure
56 when the "movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law." Fed.R.Civ.P. 56(a);
see Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A disputed
fact is "material" if under the relevant
substantive law it is essential to proper disposition of the
claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226,
1231-32 (10th Cir. 2001). Only disputes over material facts
can create a genuine issue for trial and preclude summary
judgment. Faustin v. City & Cty. of Denver, 423
F.3d 1192, 1198 (10th Cir. 2005). An issue is
"genuine" if the evidence is such that it might
lead a reasonable jury to return a verdict for the nonmoving
party. Allen v. Muskogee, 119 F.3d 837, 839 (10th
Cir. 1997). Plaintiff Wilbanks Securities does not dispute
any facts set forth by Defendant but argues Defendant
misinterprets the terms of the Bond. The Court concurs with
Defendant's interpretation of the relevant provisions
thereof, and concludes that Defendant is entitled to judgment
in this action.

Plaintiff
relies on two provisions in the “Insuring
Agreements” section of the Bond, clauses (A) and
(E)(1). By virtue of the Bond, Defendant agreed to indemnify
...

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